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BW Businessworld

The Idli Factory

A loyal workforce has helped build the Saravana brand as much as quality ingredients and standardisation have

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How many of you keep your boss’ photo in your wallet? This may sound bizarre in today’s times. But, it is a reality for R. Samisingh, branch senior manager for 34-year-old south Indian food chain Saravana Bhavan in Delhi. For him, the restaurant chain’s founder P. Rajagopal is ‘annachi,’ (meaning elder brother in Tamil) not out of respect but in a literal sense.

Rajagopal doesn’t only sign his monthly pay cheque, but he pays for his house rent, children’s education, school uniform and textbooks, his yearly travel to his hometown, plus the entire family’s medical bills. Last year, he even paid for his parent’s funeral rites. For employees of small Indian outfits used to a ‘lala’ culture, this was more akin to Google and Facebook that hit the headlines for their generous employee benefits.

Saravana Bhavan realised very early on how crucial its workforce was to developing a quality product and brand. Today, its 7,000-plus employees generate over Rs 1 crore a day serving piping hot sambar and idlis and other south Indian delicacies to over one lakh customers through 33 outlets in India and 63 others spread over capitals of the world — London, Paris, New York, and Hong Kong.

The Benefactor
The man behind the restaurant chain is 67-year-old Rajagopal who started Saravana Bhavan in 1981 as a small restaurant in a middle class neighbourhood in Chennai. For the first six months, he made losses of Rs 10,000. “Not because he didn’t have customers, but because he wanted to source the best quality ingredients and keep the prices low,” P. R. Shiva Kumaar, his elder son, told BW. The word spread about tasty food that was cheap. Idli and vada were Rs 5 per plate then. It seemed to be the right recipe for success and he opened two more branches in the first three years in Chennai.

In spite of the success, Rajagopal didn’t forget his humble beginnings. While growing up, he didn’t go to school doing odd jobs as a cleaner or a tea maker to make ends meets. “As a giveback to society, he employed people from villages and paid for their family’s expenses so the next generation could study and have a decent career,” says Kumaar.

Rifaquat Mirza, an independent hospitality consultant who has studied their business model says: “The hospitality industry is notorious for long working hours and low wages. In that context, Rajagopal became a legendary figure in Chennai amongst his employees as he was the first person to put them on a regular payroll and give them benefits that were even better than the organised sector.”

The employee benefits that Rajagopal had introduced are still in vogue today despite all the cost cutting in the recessionary world around. “Whatever was put in practice by father continues. We have not eliminated any of the schemes he introduced. We want to take his legacy forward and take care of 7,000-plus employees and their families,” says R. Saravanan, the younger son.

It is therefore not without reason the company commands blind loyalty. P.B. Prasad, the supervisor of the Delhi restaurant, who started as a security guard 24 years back in Chennai, tells us in Hindi: “No one else will give me such benefits and the opportunity to grow and learn; so why should I ever leave this place.” The attrition rate at Saravana Bhavan is less than 10 per cent, Kumaar claims, against an annual industry average of 50 per cent.

“It is very difficult for other restaurants to poach employees from Saravana Bhavan,” says Praveen Anand, an executive chef who started the restaurant Dakshin at Sheraton Hotels which has been named by the Miele Guide as one of the top 20 restaurants in Asia. It is this focus on employees that has helped them deliver the same experience and product quality year after year across their outlets, whether in Chennai, Delhi or in Paris.

Shades of Grey
But a controversial past continues to haunt Rajagopal. Stories of his munificence stand in stark contrast to a record of felony in a murder case. In 2002 Rajagopal was charged for committing a crime of passion. He was accused of murdering Prince Santhakumar who was the husband of his manager’s daughter Jeevajothi, whom he wanted to make his third wife. Rajagopal was arrested in 2004 and later convicted to 10 years in jail. He, however, secured bail within three months of his conviction from the Supreme Court, and the case is pending final hearing.

But, this crime didn’t seem to affect his business. By then his two sons, Kumaar and Saravanan had joined the chain. In fact, they also opened three restaurant branches outside India, in Canada, Oman and Malaysia. The sons changed the focus of the company to opening outlets in countries that hosted a large Indian diaspora.

Generally, when the second generation joins the business it goes all out with new ambition, changing the business model, and making the ambience zippy zappy and the food ‘modern’. The two brothers did nothing of the sort. They stuck to the original plan. “They have been intelligently conservative opening only 4-5 branches a year, when they can expand much faster, given their size and scale,” says hospitality consultant Mirza.

The family has taken the route of organic growth and avoided the rapid but dissipative path of venture capital funding. A case in point of the pitfalls involved in the latter route is the skirmish at the south Indian food chain Sagar Ratna where private equity (PE) investor India Equity Partners (IEP) bought a controlling stake of 73-75 per cent. Later, there was a falling out with the company’s founder Jayaram Banan, who eventually resigned.

Saravana Bhavan is quite the opposite; it is still a tightly-held family business where loyalty counts and only long-serving employees take care of new outlets. Most of the restaurant managers and cooks have been with the company for over 25 years, informs Saravanan. In fact, whenever they open a new outlet, in Delhi or in Palo Alto, they fly their senior staff from Chennai to look after the branch. “It is because of the close knit team and the common training that gives the chain the efficiency and consistency not seen in any other QSR chain,” adds Mirza.

“We don’t take local chefs especially for branches outside India. It doesn’t work. We want people across the world to savour the same taste as they would get in Chennai,” says Kumaar who overlooks the overseas operations of Saravana Bhavan.

That is one of the biggest problems also. “Getting work permits for our staff to work especially in European countries continues to be a challenge. These countries want a formal degree from a catering institute before granting work permits. These people don’t even have basic education; so how can they get a formal degree,” says Kumaar.

This has spelt trouble for the group. In 2008, Kumaar was arrested in the US and charged with submitting forged documents in order to gain entry into the US for some of his employees. Saravana Bhavan sources claim that there was a ‘misunderstanding’ and the case was subsequently withdrawn.

Legal battles to obtain work visas have become part of business operations for Saravana Bhavan. “It is a difficult, laborious and expensive procedure,” he says. In Frankfurt, in 2013, they taught the local chefs to cook sambar to demonstrate to the labour ministry it takes more than formal training to make south Indian sambar.

Facing KFC Competition
The last change they made to the menu was when they introduced their own brand of ice creams when they opened the dairy division, Saravana Dairy Food, in 2000, says Saravanan. The only other menu change has been several meal combo options introduced to fight competition from food chains like the McDonalds and KFC, especially during lunch hours.

What they also did was standardise the recipes of all their 250-plus dishes so the taste and flavours remained identical in all outlets across the globe. They also have an in-house maintenance laboratory manned by a 10-people team to develop automated machines including customised idli steamers, utensils, fryers, and ice cream makers.

Saravanan says the biggest achievement of this lab is the coffee-vending machine that dispenses the famous south India brew.

“Each cook at Saravana Bhavan kitchen has its own speciality. There is a dosa master, an idli master and a vada master; and each of them prepares only that dish and nothing else. What I ate dosa in the 1990s in their Chennai branch at T. Nagar it was superb. I have never had a better dosa. Today, their quality has gone down; but it is still good,” says chef Anand.

The drive for standardisation may have taken a toll. But what has not changed is the high quality of ingredients used. “We source our vegetables from places where they are best grown. Onions from Nasik, coffee from the Nilgiris, and red chillis from Guntur,” says Saravanan. The chain also sources raw materials from multiple suppliers to ensure competition and competitive prices.

It is this focus on quality that even after 34 years, Saravana Bhavan outlets still boast of serpentine queues at meal hours. It is literally due to the word of mouth, so they don’t spend money on advertising. “The only time we advertise is to announce the opening of a new branch,” says Saravanan. The plain white board with ‘Saravana Bhavan’ written in red and blue still welcomes the guests. And the good food keeps the hungry hordes coming!

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(This story was published in BW | Businessworld Issue Dated 11-01-2016)